Ethanol and the Price of Food

In the Huffington Post on November 11th, Dave Vander Griend took aim at a coalition of food companies opposing the federal mandate for biofuels production. For months, these companies have felt the same pinch consumers in America and across the globe have felt as food prices have spiked, spurred by the US's misguided energy policy.

At the Environmental Working Group (EWG), we don't agree with some of these companies on their environmental practices. We do agree, however, that our country's rush to ethanol contributed to a dramatic rise in grain and food costs at home and abroad, including, disturbingly, in developing nations where hunger is a perennial problem. The law of supply and demand is working just the way we'd expect: when you use over 25 percent of the U.S. corn crop to produce fuel, you reduce the global food supply and push grain prices skyward. The International Food Policy Research Institute (IFPRI), the Organization for Economic Cooperation and Development (OECD), the UN, the World Bank, the International Monetary Fund (IMF) and Oxfam agree.

Mr. Vander Griend's main complaint appears to be that while the price of corn has dropped in recent months, the cost of food has not. This should not come as a surprise. When you reduce the cost of corn or any other feed grain, it takes months for the market to adjust and to see savings reflected at the cash register.

Then there's the impact America's misguided ethanol policy has on the environment.

In Iowa alone, the 7.6 million metric tons of greenhouse gases emitted by ethanol plants each year are equivalent to emissions from almost 1.4 million cars, according to the Iowa Department of Natural Resources. The rush to increase corn production for ethanol has increased agriculture-related toxic run-off in the Mississippi River Basin, and that has swollen the Gulf of Mexico's "Dead Zone" to record levels. Precious wildlife habitat is being plowed under as farmers plant more fuel crops to meet the federal mandate.

Yet even if the entire 2008 corn harvest were channeled into ethanol production, we would displace only 15 percent of the gasoline we use each year.

Mr. Vander Griend is right about one thing: these are tough economic times -- for the consumer and for the taxpayer hoping to see the government move more aggressively to solve our energy and climate change challenges. With mounting evidence supporting the conclusion that ethanol does more to hurt the environment than to help it, are billions of dollars in subsidies currently being lavished on the ethanol industry worth the money?

That question becomes even more pressing when you consider three out of every four dollars the US government spends to support renewable energy producers (including wind, solar, and geothermal) goes to ethanol.

Comments

[JoannaSchroeder]

While we appreciate seeing opposing views regarding the impact of ethanol on the environment, we would like to also encourage your readers to explore this topic on their own. Your readers can find multiple studies available at www.drivingethanol.org on the benefits of ethanol and its positive impact on the environment.

Thanks,
Joanna Schroeder
EPIC Communications Director

[econofreak]

I've worked on over 5 projects for dirt-poor farmers from Palestine to Ecuador and they need our help. People's diets suck and not just in the U.S.. Ethanol uses up the cheap starch from corn, which the world has been awash in for 30 years, while it produces the concentrated protein the world has been short on (while also producing an environmentally beneficial fuel).

It's disgusting that people are starving in countries whose governments stuff their treasuries with import taxes on food of all types - grain, protein feed, dry milkpowder, etc.. And although these "taxes on the urban poor" drive up 3rd world internal starch prices for some farmers, they also result in their livestock producers buying high-priced bagged feed instead of cheaper (imported) DDGs or soybean meal. Sure, the people get fed - but with low-protein boiled rice - and their short life spans and stature testify to that.

So let's go for smart policy - soak up starch to replace dirty oil and replace 3rd-world import tariffs with higher world starch prices alongside relatively low-cost protein feed. Market incentives will rebalance starch-to-protein ratios and we'll have a healthier (and taller) world population as a result.

[GoldEnergy]

This article is based upon the propaganda put out by Big Oil and the GMA. First off, the Argonne National Laboratory has put out definitive studies showing how corn-based ethanol provides a 30-60% net energy gain when produced (versus a 20-30% energy loss for gasoline). Only 1-2% off the corn production actually goes toward direct human consumption...nearly 90% off corn goes toward feeding cattle at large feed lots around the country. Making alcohol (ethanol) from this corn not only gives us a renewable & clean energy source for powering our cars (at a virtually non-existent vehicle conversion cost) but the distiller grain left over provides a much better cattle feed since the starch is no longer present which the cattle cannot digest in the first place. The distiller grain (usually referred to as DDGS or dried distiller grains w/ solubles) contains all the protein, fats, & minerals contained in the original corn kernel with the starch taken out and turned into clean burning alcohol. Cattle/livestock gain weight faster (nearly 20% faster) on DDGS and the byproduct is a viable alternative to Big Oil's waste product - gasoline.
Please do a little more research before you start blaming corn-based ethanol for increases in food prices...how about looking into the fall in the value of the dollar over the past eight years and the role of the increase in price of fossil-fuel based energy supplies that are used in getting all products to market.

[rsteenblik]

Well done, Ken. Tell it like it is! The chutzpah of the ethanol industry is breathtaking. It has one of the most powerful lobbies in the agri-food industry, and then it complains that another group might engage in a bit of the same?! The difference is that all the food industry is asking for is a level playing field. What the ethanol lobby is defending are the subsidies, border protection and federal market guarantees (a.k.a., the renewable fuel standard) for its product. If it weren't for those, I doubt that the grocers or anybody else would be doing anything other than letting the industry compete with other consumers of corn.

It is amusing, also, to see the ethanol lobby try to portray opposition to subsidized and mandated ethanol as some kind of conspiracy cooked up and orchestrated by the grocers. Anybody who is involved in the debate knows such an allegation is risible. Critics have been warning of environmental effects and fuel-food competition from corn ethanol since at least the 1980s.

And if anybody questions your reference to the "billions of dollars in subsidies currently being lavished on the ethanol industry", just send them to the reports by the Global Subsidies Initiative:

http://www.globalsubsidies.org/en/research/biofuel-subsidies-united-states-2007-update

[tompoe]

When the price of a commodity rises, retail prices rise instantly. When the price of a commodity lowers, retail prices do not, and often continue to rise. So, why would you state, "When you reduce the cost of corn or any other feed grain, it takes months for the market to adjust and to see savings reflected at the cash register."? From my position at the cash register, I have never found food prices going down. From year to year, my cost for food continues to steadily rise, regardless of market swings. Maybe your read on what's happening in our economy is based on separation of reality in order to justify a corporate mantra of lies.

[KillTheMessenger]

Corn ethanol was never a renewable energy source, but it was always just another tax dollar suction device.